Jim Rogers gives his tips for 2016

SKAGEN has asked the legendary investor Jim Rogers, who has been a speaker at SKAGEN's New Years Conference, a few questions about the global economy and his outlook for 2016.

Date: 28/12/15

Investor Jim Rogers founded the hedge fund, Quantum Fund, together with financier George Soros in the 1970s. He is pictured here at SKAGEN's New Year Conference 2014.

When you visited SKAGENs New Years Conference the first time, in 2007, you told us that the future belonged to China and that it would take the role Britain and the US have had the last two millennia. Do you still subscribe to this view? Or has your opinion changed in the light of the slowdown in China we have experienced lately?

I absolutely still subscribe to this view. You can see what has happened over the past 8 years in China!

I am a bit startled at the question. Economic adjustments are normal as are recessions. America became the most successful country in the 20th century, but had 15 Depressions along the way - as well as a horrible civil war, massacres in the streets, few human rights, little rule of law, etc, etc. China will have plenty of problems along the way just as did the US, UK, et al. I do not know what, when, why, how, etc. But problems are the norm. In fact, it is an anomaly that China has had so few problems as it has risen. There will be more, but that does not change what is happening over the course of the century.

At the same conference you told us you were moving to Asia from New York City. You then sold your apartment in New York for a record price and moved to Singapore. Then there was the financial crisis. Lately real estate has appreciated however. Not only in New York but elsewhere in the US too. And the stock market has reached new all time highs on the back of low interest rates and a revival of the US economy. Do you think we are seeing a bubble in asset prices in the US now?

To move to Asia was one of my very best calls ever. Well, yes, real estate prices have gone up, but prices have not reached previous levels in much of the US despite absurd interest rates. Wait until interest rates return to more normal levels.

The stock market is expensive, but it is not a bubble except in a few sectors perhaps. Property may be in a bubble in a few areas, but not like before.

When you spoke at our conference in 2014 you were concerned that the financial sector had become too big and the agricultural sector too small. You said that "in two decades stockbrokers will drive tractors and farmers Lamborghinis". Do you still believe this?

Gosh, yes. Are you not aware of all the layoffs in finance in the US, UK, et al and how hard it is to get a job in finance now? There will be much more when we have a bear market. The US market was down only slightly in 2015 and we are already seeing problems. Just wait.

For what it is worth, many farmers are doing well now partly because their expenses are down. Agricultural land prices are up in many places since then. I still suggest leaving finance for agriculture in most of the world. [I am bullish on finance in China for historical and political reasons, but bearish on finance in much of the world.]

How would you explain the fall we have seen in commodity prices over the last couple of years?

Very good question. Oil is down for geopolitical reasons with the collusion between the US and Saudi Arabia over Iran and Russia plus Saudi's desire to slow fracking. It has gotten out of hand as do all market declines – especially those which are artificial. Known reserves are still declining worldwide [except for fracking which is now crippled]. The frackers will not be back so strongly on the next rise as the lenders, investors, etc. now realize it is not so easy. Saudi has been successful in that effort.

Finally, where do you see the most value from an investor's point of view and the least when we are moving into 2016?

There will be money made shorting junk bonds.

I suggested Russia at your conference in 2014 to my delight. Two of my three major positions there are making all-time highs since then to my surprise and delight: Phosagro [agriculture] and Moscow Stock Exchange [finance]! While Aeroflot [airline], is the highest except for a couple of earlier spikes. I would suspect Russia will continue to be attractive although Iran, Nigeria, and/or Kazakhstan might be better in the next 2-3 years.

And SAS? I leave that one to Skagen although I am delighted to be making nice money in SAS in a period when many stocks have been bad.

Historical returns are no guarantee for future returns. Future returns will depend, inter alia, on market developments, the fund manager's skill, the fund's risk profile and management fees. The return may become negative as a result of negative price developments.